If annual demand is 24,000 units, orders are placed every 0.5 months, and the cost to place an order is $50, what is the annual ordering cost?a.$600,000b.$1,200c.$50d.$1,200,000e.$2,400,000
Question
If annual demand is 24,000 units, orders are placed every 0.5 months, and the cost to place an order is 600,000b.50d.2,400,000
Solution
To calculate the annual ordering cost, we first need to determine how many orders are placed in a year.
Given that orders are placed every 0.5 months, this means that 2 orders are placed each month (since 1 month/0.5 month/order = 2 orders/month).
Over the course of a year (12 months), this amounts to 2 orders/month * 12 months/year = 24 orders/year.
The cost to place each order is 50/order * 24 orders/year = $1,200/year.
So, the answer is b. $1,200.
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